NetEase Profit Misses Estimates, Stock Down - Update

(RTTNews) - Chinese online games provider NetEase Inc. (NTES), Wednesday reported a higher third-quarter profit, helped mainly by double-digit growth in gaming revenue. However, quarterly earnings badly missed Wall Street estimates, while revenue exceeded expectations.

Investors were upset with the weaker-than-expected earnings report, sending NetEase shares tumbling 10 percent in after-hours trade on the Nasdaq.

Beijing, China-based NetEase posted quarterly net income of 1 billion renminbis, or $171 million. This compares with earnings of 812 million renminbis last year.

On a per American Depositary Share, or ADS basis, earnings for the quarter climbed to $1.31 from $1.01 a year ago. On average, eight analysts polled by Thomson Reuters expected earnings of $1.37 per ADS for the quarter. Analysts' estimates typically exclude special items.

Meanwhile, revenue for the quarter grew 23 percent to 2.51 billion renminbis, or $411 million, up from 2.04 billion renminbis in the prior year. Analysts had a consensus revenue estimate of $391.89 million for the quarter.

Revenues from online games were 2.1 billion renminbis, or $344 million, compared with 1.74 billion renminbis last year. Growth was due to the company's self-developed games like popular Fantasy Westward Journey II that was upgraded, as well as Kung Fu Master, Heroes of Tang Dynasty II.

Advertising revenues grew to 299 million renminbis, or $49 million, from 243 million renminbis last year.

"We continue to broaden the platforms for our traditional and mobile Internet product and service offerings," said CEO William Ding. "During the third quarter we completed key upgrades for two of our most popular games, increased our investment in the mobile Internet business and entered the mobile instant messaging space with the launch of YiCha."

NTES closed Wednesday at $69.41, up $2.31 or 3.44%, on the Nasdaq. In after hours, the stock dropped $7.40 or 10.66% at $62.01.